Judging heterodox economics: A response to Hodgson’s criticisms

Abstract

The renowned institutionalist Geoffrey Hodgson has claimed inter alia that heterodox economics has failed to define its nature and scope, does not take pluralism seriously, and lacks expertise concentration to ensure quality which means it has made limited progress and is held in variable esteem. To address these alleged problems, Hodgson proposes four alternative strategies: the creation of heterodox economics academic departments; for heterodox economists to enter non-economics academic departments; for heterodox economists to ‘organise’ around a successful approach with future potential; or, to encourage the study of economic institutions by other social science disciplines or by using prominent mainstream techniques and approaches.

A response to these criticisms and proposed strategies is warranted for several reasons. These criticisms are not trivial and, as an assemblage the import is much greater than a singular criticism. Hodgson is very influential within the economics discipline and he reiterates, in part, past criticisms from the mainstream as well as presenting his criticisms to a wide range of audiences. These criticisms intersect with longstanding debates within heterodox economics about the role of pluralism, the definition and project of heterodox economics, its relationship to the changing form of mainstream, and the merit of synthesis or convergence of different heterodox schools of economic thought. The suitability of mainstream measures to judge heterodox economics, and the relationship of ideology and economic theory, are also raised by these criticisms as well as the feasibility of proposed strategies to support heterodox economics within the academy.

It is argued that several fallacious claims lead Hodgson to misconstrue the nature and evolution of heterodox economics, and inherent flaws in each of his proposed alternative strategies will further marginalise—not advance—the project of heterodox economics.

Posted for comments on 4 Oct 2018, 8:22 am.

Comments (1)

I agree with your points, I will just propose few additional remarks to make perhaps things a bit easier.
In a synthetic way, economists can be defined orthodox (or mainstream) if they adhere, more or less explicitly, to the following tenets of (in particular) neoclassical theory:

(i) Economic agents behave in a “rational way” in order to maximize their utility function.

(ii) Markets are appraised as self-sustaining and “perfect” mechanisms amenable, if not unduly interfered with by public action, to the maximization of social welfare.

(iii) The above tenets are employed by orthodox economists ─ no matter how much really convinced about them ─ for building mathematical models basically appraised as “closed systems”.
In fact, this constitutes for such economists the only “scientific” way for analysing economic phenomena.

(iv) The “dynamics” of such “economic laws” can be “scientifically” (and positivistically) assessed only by considering “measurable phenomena”.

Of course, I am aware of the presence of various versions of neoclassical theory, but it is also true that all of them consider the above points, and in particular (i) and (ii), as the fundamental assumptions of their theories.
With regard to point (iv), it can be interesting to note that, even when quantitative analysis is heavily employed for investigating real situations ─ also as a way to provide a more impressive “scientific outlook” to these analyses ─ the results so obtained can never change or refine postulates (i) and (ii), just because they have the nature of a (metaphysical based) wishful thinking.
For instance, if an empirical analysis indicates that individuals behave rationally according to some proxy (for instance, if consumers choose the lowest price of an item), then the theory is “confirmed”.
If, however, empirical observations point out the presence of “irrational behaviour” (when, for instance, consumers systematically do not choose the lowest price), this does not impinge on the prime postulates, but tends to be “explained away” by treating these results as exceptions due perhaps to some unwelcome “exogenous” factor.

Heterodox economists depart from this picture as they do not accept the above mentioned aspects. There are different grounds of criticism ─ for instance, in Institutionalist, Marxist, Keynesian and Ecological perspectives ─ but all agree on the necessity to overcome the reductionism and simplification of orthodox analysis by constructing theories more aware of the complex evolutionary relations between human motivations and economic systems.
In this respect, an uncritical adoption of orthodox techniques and criteria would be suicidal for heterodox economics, as it would trap it in the same reductionist stance of orthodoxy. Conversely, a good strategy for promoting heterodox economics would start from pointing out the importance of a broader conception of empirical analysis, embracing also the qualitative and non-measurable aspects of economic contexts. The consideration of such aspects ─ neglected in orthodox analysis ─ by allowing the study of the cultural, social and psychological dimensions of economic action, would help to acquire a more far reaching picture of the manifold aspects of economic action. In that connection, two intertwined aspects seem relevant:

(I) Overcoming the limited collaboration often present in heterodox economics (and in other social sciences as well). As observed by the famous sociologist Karl Mannheim, a landscape can be seen only from a determined perspective, and without perspective there is no landscape. In this sense, observing a landscape (or phenomenon) from different angles (or disciplines) can help to attain a much clearer insight into the features of each considered perspective.
This implies considering heterodox schools ─ for instance, Institutionalist, Marxist, Keynesian and Ecological approaches ─ not as “closed systems” but, in full respect of their identities, as theoretical perspectives open to comparison with other ideas/theories, also in an interdisciplinary spirit. This would help build a stronger common ground for the analysis of economic imbalances.

(II) A more systematic attention to policy issues. As a matter of fact, if we present our activities as a forum for pluralism, this looks fine, but risks to be perceived both by the more informed audience and by the lay people as an interesting intellectual venture with, however, no tangible results in terms of better policies. And this in a period where there is a high, explicit and latent, demand for new policy solutions for the major economic and social problems of our time.